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Working with GAIC

There have been developments in the Growth Areas Infrastructure Contributions (GAIC) space this year, most notably the release of the Work-in-Kind Agreement Guidelines and recent case law.

Work-in-Kind Guidelines

Earlier this year, Planning Minister Matthew Guy launched the GAIC Work-in-Kind Agreement Guidelines and model agreements. These provide guidance for Work-in-Kind Agreements that may be entered into between landowners (often developers), the Minister for Planning and the Metropolitan Planning Authority (MPA) to deliver a portion of the State's infrastructure by land or capital works as an offset to GAIC liability.

The Guidelines detail that works or land can be provided via a Work-in-Kind Agreement to offset GAIC liability for the purposes of

State funded public transport infrastructure;

State funded transport infrastructure, such as walking and cycling infrastructure;

State funded environmental infrastructure including regional open space, trails and creek protection;

State funded economic infrastructure, including the provision of access to information and technology and infrastructure supporting the development of commerce and industry;

infrastructure or land identified as State infrastructure or land in a PSP, Growth Area Corridor Plan or similar planning document prepared by DTPLI or the MPA and;

establishment of any of the above purposes.

The MPA will oversee the negotiation of Work-in-Kind Agreements and subsequent delivery of land or capital works.

If utilised appropriately we consider that Work-in-Kind Agreements can be an effective way for developers to offset their GAIC liability, as opposed to making the upfront GAIC payment.

Recent case law

In the recent Supreme Court decision of Update Pty Ltd v Commissioner of Revenue [2014] VSC 187, the meaning of 'contract' was considered in the context of GAIC liability excluded events.

More particularly, this case considers whether the verbal acceptance of an offer to purchase property can be characterised as a contract for the purposes of 'an excluded event' under Section 201RB(d)(iii) of the Planning and Environment Act 1987 (PE Act), which exempts dutiable transactions that would ordinarily attract GAIC liability, if the contract for that dutiable transaction was entered into before the relevant date, being the date the land attracted GAIC liability.

The Parties' Respective Positions

The Applicant purchased land which was subsequently brought into the Melton-Caroline Springs growth area, causing it to be classified as Type B-1 land for the purposes of the PE Act and for which the 'relevant date' for GAIC liability assessment is 2 December 2008.

Notwithstanding that a contract of sale for such land would usually trigger GAIC liability, the Applicant contended that its contract of sale for the land did not, as it was entered into on 1 December 2008 upon verbal acceptance of the Applicant's offer to purchase it. On this basis, the Applicant argued that the contract was an excluded event within the meaning of Section 201RB(d)(iii) of the PE Act, which applies to dutiable transactions of land within a contribution area if the contract relating to such a transaction is entered into before the relevant date.

The Commissioner's position, which was subsequently supported by the Tribunal and the Supreme Court, was that there was no binding contract until the formal contract was signed on 9 December 2008, as there was no intention to create legal relations.

The Supreme Court's view

On appeal from the Tribunal regarding questions of law, the Supreme Court considered that, in light of the knowledge of the parties, the standard form contract practices utilised (ie, general practice requires both parties' signatures and the subsequent exchange of fully executed counterparts) and the status and experience of those parties, one would expect clear, express statements of an intention to proceed otherwise than by way of exchange of signed written contracts. Notably, there was endorsement of the Tribunal's method of starting with the presumption that the parties intended to contract upon exchange of signed written counterparts and then look for clear evidence that might displace it.

While the Supreme Court ultimately dismissed the Applicant's appeal, it did not rule against the possibility that a verbal contract may well qualify as an 'excluded event' contract for the purposes of 201RB(d)(iii) of the PE Act. Gadens has extensive experience in advising landowners, developers and prospective purchasers on the implications of GAIC liability and tailoring strategies to minimise its impact on development projects. Please contact us with any concerns or issues which you may have in relation to GAIC.

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Compare jurisdictions: Litigation: Enforcement of Foreign Judgments

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